How to avoid this year's common tax scams

0:00This message comes from Total Line and More. College Basketball's biggest tournament is here, and watch parties are underway. Shop Total Line and More in-store or online to get ready today. Spirits not sold in Virginia and North Carolina. Drink responsibly, be 21. You're listening to Life Kit. From NPR. Hey, it's Maryl. You know some people say taxes are boring. I don't feel that way, but I understand the point. They can be very technical, and it's hard to know if you're doing them right. So I get why it's tempting to go on social media or on a message board and have someone explain them for you. If you do that, though, keep this in mind. The tax law is technical by design, right? Mark Gallegos is a CPA and a partner at the Accounting for Importee Brown in Chicago. And he says real tax advice is grounded in the law. It comes from documentation like the Internal Revenue Code. It comes from regulations. It comes from case study.

1:00It defines what eligibility requirements are. And often includes nuances and caveats, where bad advice usually skips all of that because it seems boring. And jumps straight to the results. So like everyone qualifies. This is guaranteed. The IRS doesn't check. Those kind of things are red flags that you'll see. So like a 30-second video can make a complex tax provision sound universal. When it really applies to a very narrow set of facts and circumstances, maybe you leave in only a small amount of tax payers that are affected by it. US tax law has changed in the past year. There are new deductions that could help you shield more of your income from taxes. And on this episode of LifeKit, we will get into that. But first, we're going to talk about how to identify the bad tax advice, the misinformation, and the straight-up scams. That's after the break. This message comes from LinkedIn.

2:05Who knows an empty seat can cost small businesses more than just space. That's why LinkedIn Hiring Pro makes it easy to fill that seat with the right candidate. Streamlining everything from posting jobs to short-listing talent. Nearly 60% of businesses find someone to interview in the first week. Hire right the first time. Post your first job and get $100 off at LinkedIn.com slash NPR offer. Terms and conditions apply. Mark, could you talk about some specific examples of bad tax advice that you've seen? Yes, there are many different real-life examples out there about inflating deductions and credits and things of that nature that I run into quite a bit. So let's talk about a couple of them that are out there. One area that we see quite a bit is in tax credits. A taxpayer reports a fake 10 and 9 income so they can qualify for the interim income credit, right? Or maybe it's regarding child tax credit where maybe they don't have the number of dependents that are claiming that is not good and you shouldn't do it.

3:07It's tax fraud, but people promote different schemes that lend themselves to that. Another area is inflated business expenses. So a taxpayer with a small side business and they want to deduct 100% of their vehicle expenses. Even though they're working from home and their car has nothing to do with their business and it's purely 100% of their car is personal driving, right? Or they deduct family groceries as client meals or they write off clothing and they say it's uniforms when it's you know they don't have a uniform. And so the rule business expenses must be ordinary and necessary and properly allocated between business and personal use. At the end of the day if you're audited they're looking for is there a business purpose for it or is there a personal purpose for it? And if it falls on the personal side it's not an deductible. Yeah, some people will say online well the IRS is understaffed they are not going to catch it. They're not going to ask they're not going to follow up. Correct. Sometimes people play the game of what we call IRS roulette where essentially it's like

4:11well they're never going to catch you what's the percentage and they try to play the odds like they're gambling with it, right? Yeah. And that person that does get audited it does that. I mean there are you're not just going to get slapped on the hand there's there's penalties with that there's risk there could be civil risk there could be criminal risk. I mean of what you're trying to do and I think that's where people they see something and they're like oh I could do this and they think they can get away with it and then over time they realize they're in over their head and they're in big trouble. It occurs to me that in the realm of bad tax advice that you might see for instance on social media sometimes it'll be called out like just do this you can get away with it the IRS isn't going to catch you but sometimes it won't be called out they'll just say you qualify for this thing or like it's so easy and then the person might not even realize that they're doing something wrong when they file their taxes. Social media kind of turn tax advice into a level of entertainment and one of the things I do see with this quite a bit is when you know that voice and the social media says everyone qualifies.

5:14Everyone doesn't always qualify for everything right you'll see someone claim that you can write off your dog as a security system or that forming an LLC automatically creates new deductions. I see that quite a bit right yeah I can set it up an LLC and if it's legit business purpose I can write off those ordinary necessary business expenses but just because they set up an LLC doesn't mean I get to write off everything I do in my life right but that's kind of what they're promoting that it really takes people into a direction that they can get them in trouble. If someone posts something that is just blatantly wrong or maybe even gray you know no one understands what's really being said the tax community will reach out they'll post to it they'll respond to it they'll DM some whoever they can and they'll start to get a groundswell of like hey can we clarify what's going on here and it's not like they're policing it they're just they're very active in seeing this stuff I can tell you that take away one if you're seeing tax advice online that says don't worry about this the IRS will never catch you remember that is a

6:17game of chance and you're the one who'll have to deal with the consequences also in general if you see a piece of tax advice on social media that sounds interesting consider that a starting point now it's on you to figure out if that deduction or whatever else is real and if you actually qualify so you go online you see a 20 30 second clip maybe longer and you you watch and you're like oh that seems interesting right the first thing you need to do is just kind of slow down take a breath right in my opinion urgency is the scammer's fuel that's that's where they get their oxygen from right second assume that if something applies to everyone it probably applies to almost no one tax law is highly fax specific so credits and deductions have eligibility tests income limits documentation requirements and even industry specific criteria you can even click on the person does it say that there are a CPA a certified public accountant does it say that they're a JD attacks attorney does it say that maybe even is just an enrolled agent where people can go and say hey how do I know I heard something it sounds too good to be true but I want to check

7:21it out well you can go to irs.gov and you can pretty much search for anything there the only thing I always tell people is like does it talk about risk if you do this you may be able to get this deduction but here's the risk they're never going to tell you the risk if it's not legit a legit professional we'll talk about audit exposure they'll talk about substantiation they're going to talk about compliance whereas maybe a tax hack influencer is not going to talk about anything like that because this can turn people off right okay so let's say you do come across some sort of tax credit or deduction on tick-tock and you think yeah maybe I qualify for this you can go to irs.gov as a starting point and type your question into the search bar I have found though that the search function doesn't always work and bring you the results that you need it depends on how you ask the question so where else can you go after that so for example you my people listen to tick-tock you know and you're like well this sounds amazing I can I write off my dog so you know you can go to google would be where I would go and then it would give me sources let's see dog

8:27deduction taxes I'm putting this in an AI right now having a guard dog for your business service animal foster dog a dog that generates legitimate income expenses right and then I can be like sources from irs website and then it tells you the publication numbers the irs publication numbers where you can find this right so a lot of times you'll put in something and you may not know the answer to it because it's complex right so well if you know hey it's publication 534 or it's code section 162 or it's a treasury reggae whatever the case may be then you can put that stuff into the iris search bar and it's going to take you right to the source it's going to quote it in I'm going to go down the rabbit hole here so it says it's iris publication 502 that includes costs for a guide dog or service animal because those are medical and dental expenses correct

9:30and if you're trying to take a deduction or deciding whether to pick up something into income or not or take a credit or whatever you're trying to research what you're doing is you're trying to take a position on your tax return that's what it is and the iris says you have to have substantial authority in order to support your position otherwise that if it's audited they will disallow it and substantial authority means not oh I have a tiktok video or an instagram post that says I can do this there's nothing substantial authority about that it is I can do this because in turn in revenue code whatever says I can do it and again if it's if it's something that's very complicated and you can't get to it that probably tells me you need to talk to someone that does know what they're doing take away to always use a primary source to verify tax information that means looking at iris.gov and reading the particular section of the iris publication that

10:33applies now sometimes you might type something into the iris.gov search bar and not find what you're looking for in those cases you can use a search engine or an AI program to send you in the right direction now I want to be clear that is not your final step but it can be a helpful tool so you can type can I deduct my dog into an online search or AI and ask specifically for iris publication numbers and links to sources from the iris website and then you read those of course you can always hire a professional like a CPA certified public accountant to explain this stuff to or help you file your taxes we'll have more life kit after the break this message comes from linkedin who knows an empty seat can cost small businesses more than just space that's why linkedin hiring pro makes it easy to fill that seat with the right candidate streamlining everything from posting jobs to shortlisting talent nearly 60% of businesses find someone to interview in the first week hire right the first time post your first job and

11:38get a hundred dollars off at linkedin.com slash npr offer terms and conditions apply why do you think that people pedal so much misinformation about taxes on social media is it just for clicks there's some people that are looking to just become influencers and this is their livelihood and they're making money from it and they're just trying to sell anything in order to get the clicks there are other people that have a different hidden agenda behind it and sometimes it's hey can I get your credit card information can you pay some money I need a retainer and it's not a legit person yeah yeah so now we're talking about more traditional scams like where someone is trying to steal your information or steal your money what are some of the tax scams that you're seeing this year for instance oh yeah so there is the tax resolution scam there'll be like some sort of a person that reaches out to you and it says hey there's an IRS liability reduction program and we can help you with this and it all seems

12:41official right if you owe the IRS will help you right now the psychology here is there's an urgency part of it this is our final attempt to reach you or they don't owe anything but they're getting somebody that's insisting that they may owe something right getting threatening phone calls it says hey if you don't pay this you will end up in jail and that so that's just so false so that's one level of scam I see quite a bit another one is you'll see texts that say your refund is ready you just need to verify your identity or an email that says hey you owe money or you're getting a refund or can we verify something delete that what about on social media when it says like click here and you'll get this credit or click here and I'll explain everything I would stay away from that yeah I mean the likelihood is it's a tax hack that is looking to either gather information about you by getting you to click on it and fill out some information or it is some other scam that's going to then hack into your system by you clicking on it

13:43take away three this tax season you may also run into straight up tax scams or someone tries to hack into your computer by getting you to click a link or someone tries to steal your information by getting you to fill out an online form you might also get a text saying hey this is the IRS you owe us $8,000 pay now or you're going to jail PS we only accept payment and gift cards okay it won't be quite so obvious but remember the IRS is not going to text you to threaten you with jail time the IRS will only text you with your permission now they might call you but if they leave a message they say on the website that it won't have any specific details so that's something to look out for oh and they don't accept gift cards as payment if someone does leave you a voicemail claiming to be the IRS and they give a callback number go to irs.gov to verify that the number is legit or call the IRS directly with the number on its website how can you make sure when if you are hiring someone to help you with your taxes that they're not scamming you and that they actually

14:46have the right credentials are not trying to steal your information great question those are the tax prep scams we see so so a ghost prepare prepares a return but refuses to sign it anyone you're paying to prepare your tax return also needs to sign it as paid prepare at the bottom of the tax return their name should be on there their name of their firm their name of their address and so that's not optional it's required they also have to have a valid pton and it's a specific number that's issued to people that are licensed and authorized to sign tax returns to tax advisors or to CPAs to someone who's preparing your taxes need your social security number to do that well we need your social security number to prepare the tax return because it does get reported on the tax returns and again to be honest with you we get bank account information we have access to a lot of personal information about your family your kids date a birth the whole thing right so before you start giving any random person all that information you need to kind of do a little bit of due diligence to verify that they are who they say they are okay take away four your tax

15:52prepare should have what's called a pton a preparer tax identification number that comes from the IRS also they should always sign your return as a paid prepare and include their name the name of their firm and their address now there are a few different kinds of professionals who can prepare taxes for you enrolled agents certified public accountants even attorneys and the list goes on the IRS by the way has a public directory of credentialed tax preparers all right so let's get into some of those tax law changes that hit this year in July of 2025 president trump signed a law called the one big beautiful bill act that law created and expanded certain tax deductions and one is the state and local tax deduction when you're doing your taxes you decide whether to take a standard deduction or to itemize your deductions you would itemize if your expenses added up to more than the standard those expenses can include things like medical costs charitable donations mortgage

16:55interest and the state and local taxes you paid in the past year there used to be no dollar limit on the state and local tax deduction but the tax overhaul law passed during the last trump administration changed that it said now you could only deduct $10,000 of state and local taxes as an individual so effectively it cut back on a tax deduction that had been very helpful for a lot of homeowners and for a lot of people who live in high tax cities and states but now the cap has been raised to $40,000 it does have some limits specifically there are income limits and we're not going to get into all of those here but yeah see if you qualify a few other new deductions if you get over time pay you might be eligible for a federal tax deduction of up to $12,500 and if you get paid tips you may also be eligible for a deduction up to $25,000 and if you're 65 or older you might be eligible for a $6,000 deduction if that's not you by the way maybe it's your parents and you can take any of those three that I just mentioned whether or not you itemize

18:00now this is not an exhaustive list but these are some of the deductions to look into this year before you file now it's time for a recap take away one if you see a piece of tax advice on social media that sounds interesting consider it a starting point it's on you now to figure out if that deduction or whatever else is real and if you actually qualify take away two always use a primary source to verify tax information that means looking at irs.gov and reading the particular section of the irs publication that applies of course you can also hire a professional for tax advice tax preparation or both take away three this tax season beware of scammers who may try to seal your information or get you to send them money remember the irs is not going to text you to threaten you with jail time the irs will only text you with your permission they say they might call you but just know if they leave a message it won't have any specific details if someone leaves you

19:01a voicemail claiming to be the irs and they give a callback number you can verify that it's actually them by going to irs.gov and searching for that phone number you can also call the irs directly with the number from its website take away four your tax preparer should have what's called a p-10 a preparer tax identification number that comes from the irs and they should always sign your return as a paid preparer and include their name the name of their firm and their address okay that's our show before we go I have a question would you mind rating and reviewing life kit in your podcast app you could tell us a favorite tip that you've learned or you could tell us about what kinds of episodes you like the best we love hearing from you and it would help us out a lot all right this episode of life kit was produced by Margaret Serino our digital editor is Maulika Garib Megan Cain is our senior supervising editor and Beth Donovan is our executive producer our production team also includes anti-tagel Claire Maurie Schneider Sylvie Douglas and Mika Ellison

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